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The Impact of Stakeholder Orientation on Innovation: Evidence from a Natural Experiment

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  • Caroline Flammer

    (Ivey Business School, University of Western Ontario, London, Ontario N6G 0N1, Canada)

  • Aleksandra Kacperczyk

    (Sloan School of Management, Massachusetts Institute of Technology, Cambridge, Massachusetts 02142)

Abstract

In this study, we assess the causal impact of stakeholder orientation on innovation. To obtain exogenous variation in stakeholder orientation, we exploit the enactment of state-level constituency statutes, which allow directors to consider stakeholders’ interests when making business decisions. Using a difference-in-differences methodology, we find that the enactment of constituency statutes leads to a significant increase in the number of patents and citations per patent. We further argue and provide evidence suggesting that stakeholder orientation sparks innovation by encouraging experimentation and enhancing employees’ innovative productivity. Finally, we find that the positive effect of stakeholder orientation on innovation is larger in consumer-focused and less eco-friendly industries.Data, as supplemental material, are available at http://dx.doi.org/10.1287/mnsc.2015.2229 . This paper was accepted by Lee Fleming, entrepreneurship and innovation .

Suggested Citation

  • Caroline Flammer & Aleksandra Kacperczyk, 2016. "The Impact of Stakeholder Orientation on Innovation: Evidence from a Natural Experiment," Management Science, INFORMS, vol. 62(7), pages 1982-2001, July.
    • Handle: RePEc:inm:ormnsc:v:62:y:2016:i:7:p:1982-2001
    DOI: 10.1287/mnsc.2015.2229
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